Most Asian equities rose on Thursday, following the positive momentum in the U.S. markets, as investors positioned themselves for the possibility of a second Donald Trump presidency, alongside expectations of a Federal Reserve interest-rate reduction.
Stocks in Hong Kong and China surged on optimism that Beijing would announce further stimulus measures to support the economy. This came after a 2.5% rally in the S&P 500 on Wednesday, marking its best post-election performance in history, and a 2.7% rise in the Nasdaq 100. The Fed is expected to lower its benchmark rate by a quarter point on Thursday, which further fueled market optimism.
U.S. stock gains reflected investor expectations that Trump’s proposed policies, such as tax cuts and deregulation, could boost corporate profits. However, treasury yields surged 16 basis points on Wednesday, driven by concerns that Trump’s fiscal plans and potential tariff hikes could lead to inflation, limiting the Fed’s ability to cut rates further.
“After digesting Trump’s victory, investors in Asia are now turning their focus to the expected stimulus announcements from China,” said Frederic Neumann, Chief Asia Economist at HSBC in Hong Kong. “There is growing hope that China could unveil a large fiscal package in the coming days, offering support for its slowing economy.”
In China, stocks initially opened lower but rebounded into positive territory. Consumer and property stocks led the rally as traders speculated that Beijing might prioritize domestic demand in response to any potential fallout from Trump’s return to the White House.
Chinese authorities also took action to ease currency pressures, lowering the daily reference rate for the yuan to its lowest level since late 2023. This move followed a surge in the dollar that had negatively impacted the yuan.
In a positive development, China’s export growth surged in October, recording the fastest pace in more than two years. This resilient export performance has helped sustain the Chinese economy ahead of expected stimulus measures designed to shore up domestic demand.
“It’s highly likely that Beijing will roll out more fiscal and monetary stimulus, which could mitigate some of the challenges posed by trade headwinds,” said David Chao, Global Market Strategist at Invesco in Singapore. “All eyes are on China’s policy decisions following the NPC Standing Committee meeting on November 8th.”
Regulators in China have also directed banks to reduce the rates they offer on demand deposits from other financial institutions, freeing up capital to stimulate the economy.
In Japan, the yen strengthened after Japan’s chief currency official, Atsushi Mimura, signaled that the country would take appropriate action against excessive currency fluctuations. The yen had dropped nearly 2% on Wednesday following Trump’s election win.
The Bloomberg Dollar Index eased slightly in Asia after a sharp 1.3% gain on Wednesday, while U.S. Treasury 10-year yields dipped one basis point to 4.42%. Additionally, spreads on Asian investment-grade dollar bonds tightened to a record low, with yield premiums shrinking by at least one basis point, according to credit traders. On Wednesday, spreads had narrowed to 73 basis points, marking their lowest level since Bloomberg began tracking this data in 2009.
Fed Rate Decision
Market participants are widely anticipating a 25-basis-point cut to the Fed’s benchmark interest rate at the conclusion of its two-day meeting. This would follow the half-point reduction in September. The median estimate suggests one more quarter-point cut this year, with an additional full-point reduction in 2025.
“As we move into 2025, we may see just two or three rate cuts for the year, depending on the balance of policy and economic growth,” noted Yung-Yu Ma of BMO Wealth Management.
On Wall Street, the “fear gauge” — the VIX index — plunged on Wednesday by its largest margin since August. Trading volume also surged, with nearly 19 billion shares changing hands, 63% above the daily average over the past three months.
Other Markets
Bitcoin, often viewed as a “Trump trade” due to his favorable stance on digital assets during his campaign, dipped on Thursday after hitting a record high the previous day. Meanwhile, oil prices rebounded following a volatile session on Wednesday, as traders weighed the likely impact of Trump’s policies on the global crude market.
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